Today's Wall Street Journal has a front-page article about a very interesting development in our judicial branch. The Journal reports (well) on a decision by a federal district judge, Jed Rakoff, to void a settlement between the SEC and Bank of America BAC. That settlement included a $33 million fine to be paid by the Bank of America regarding the disclosure of payment of bonuses to employees at Merrill Lynch just before its acquisition by Bank of America. The judge found fault with the fact that the same parties harmed by the asserted misconduct--shareholders--were the ones being asked to pay for the damage.  Those who paid the bonuses, and the lawyers who advised them, were left unscathed.   More 

I recently met with the representatives of a new fund of funds. The company's funds are only one month old, but the SEC permits them to quote a three-year track record. They would like Morningstar to do so, too.

I said, quite wittily, "Huh?"

It works like this. None of the underlying funds held by the fund of funds have a three-year track record--but the SEC permits the new funds to use the record of the existing funds from which they were cloned. OK, we've seen that before. But how to create the performance for the wrapper, for the fund of funds itself? Easy. The fund of funds is based on an index, so just say that the fund of funds would have held the underlying funds in the same proportion as specified for the index.   More 

...are built on the ruins of the bowers of paradise.' So noted an inspirational leader in the American Revolution, Thomas Paine, in the opening sentences of his fire-breathing pamphlet Common Sense. 

What did he mean, and why does it matter here? Well, I had to look up the word bower to begin with. One of the meanings deals with cottages or homes. Paine was discussing what happens when free society decides to give up some of its freedom for government solutions. But there are downsides with King George, and government generally. Among those early observations, Paine electrified colonial America with:

"Society in every state is a blessing, but Government, even in its best state, is but a necessary evil; in its worst state an intolerable one: for when we suffer, or are exposed to the same miseries BY A GOVERNMENT, which we might expect in a country WITHOUT GOVERNMENT, our calamity is heightened by reflecting that we furnish the means by which we suffer. Government, like dress, is the badge of lost innocence; the palaces of kings are built upon the ruins of the bowers of paradise."   More 

Once again, politicians and regulators around the world have accused commodity speculators to have pushed up energy prices. They want to regulate futures markets more tightly to prevent these wide swings in the prices of oil and other energy inputs.

Of course, they are both wrong and in bad faith.   More 

All media outlets have reported the exemplary jail sentence given to Bernard Madoff. Madoff is a criminal who deserved a harsh punishment. Still, does it not smell fishy to you?   More